Shah's Economic Projects Hit Snags, Periling His Regime

Shan Mohamed Reza Pahlavi is beset by grave economic, social and political problems he set in motion when he spearheaded the successful oil producers' fight to quadruple prices in 1973.

Rarely would contemporary history appear to provide such an example of a people's ingratitude towards a leader who had brought about an economic miracle of similar proportions.

The emerging middle class he sostered is following the pattern long established by the upper crust in placing its money abroad in Western Europe and the United States when it is not itself emigrating.

At the bottom of the social ladder enough social discontent exists to allow the shah's old adversaries - Shiite Moslem leaders opposed to his secular devotion to modernization - to stage riots that have damaged Iran's image abroad.

If, after 37 years in power, the autocratic shah finds himself in such hazardous circumstances he has no one but himself to blame, in the view of many friends and critic alike.

For it was his disastrous decision to inject the lion's share of the new oil money directly into the already badly strained Iranian economy.

He personally ordered the fifth development plan's funds doubled to nearly $70 billion. He ignored suggestions that ports, roads and other infrastructure should be built first or that the huge oil profits be invested massively in the West as other Middle East producers did.

Instead the shah marshalled Iran's wealth the second biggest oil explorter - after Saudi Arabia - to bulldoze his way into mass industrialization overnight.

Government commissions set up to investigate the ensuing fiasco pin-pointed factors ranging from delays and cost overruns, poor management and worse supervision to questionable foreign contractor performances and shortages of materials and manpower.

Economists acknowledge privately that most of the money of the fifth plan, which ended last year, was wasted.

Iran is still trying to dig out from the debris and to a great degree the success of that effort will determine the stability of the regime and history's judgment of the now 58-year-old monarch.

So far the eight-month-old government of premier Jamashid Amouzegar has done little to introduce the forceful, rational choices it was supposed to formulate.

The shah has already paid the price for insisting on personal control of a country whose complexity clearly called for a delegation of power and decision-making.

In a recent interview, the shah insisted that Iran would push ahead as scheduled with its most economically questionable projects, massive petro-chemical complexes and 23,000 megawatts of nuclear power by 1994.

Taken together they symbolize the shah's increasingly elusive goal of finding alternative sources of foreign exchange earnings by the time oil revenues start falling in 15 to 20 years.

His domestic and foreign critics claim his stubborn insistence on pushing ahead on these two fronts shows his taste for wasteful prestige projects.

The shah did not answer directly when asked in the interview if he still believed that Iran would become the world's fifth industrial power by the end of the century.

"He realizes the extent of present and future problems," a veteran shah-watcher said by way of explanation, "but that does not mean he accepts them."

The detailed problems involved constitute a primer of Third World economic horror stories.

A spoiled and largely unskilled work force grown accustomed to annual wage increases in the 25 to 50 percent range has little notion of discipline. Productivity is low - and slipping.

The government is delighted that inflation has been reduced to a current annual rate of 24 percent.

Capital costs for new plant range from two to three times as much as similar projects in Western Europe or the United States.

A dearth of foremen and middle-level executives means quality is shoddy.

Good vocational schools are the exception as are good teachers.

The concept of maintenance is little known.

Housing, water, roads, communications, electric power are in short - or erratic - supply.

Food imports range around the $2 billion mark annually because peasant farmers are being drawn to the big cities.

There is glaring inequity in the distribution of income.

Economists claim there is little the shah can do. "He's locked into big projects and its hard to change," an economist said. "He's in a box for the next three to four years."

Government policies over the past three years, moreover, have hurt business confidences. Investors cite several official measures: legislation instituting 49 percent worker participation in companies, a 25 percent ceiling on foreign equity except for high technology fields such as electronics - and price controls.

Real economic growth was limited to 3.2 percent last year - and is not expected to go much beyond 7 percent in this year.

While many developed countries would be happy to achieve such figures, they are a kind of reproach to the shah and his policies.

With nearly 34 million citizens Iran has grown used to cars, television sets and other Western amenities which only five years ago were the status symbols of Tehran's rich.

"It's no use comparing the bad old days of relative penury to the present because half the populaton is under 16.

"It may well be the shah is regretting he didn't just invest the money abroad and leave things at that," a diplomat said.

"He wouldn't have done as well as he liked," he added, "but he would have done much better than he'll end up doing this way."

"The only way out for him now," he said, "is to deliver the goods - and fast but can he?"